A new draft of proposals being considered by the European Union includes “skimming the revenues” of energy companies to tackle surging bills that threaten to cripple households and businesses across the bloc, The Irish Times can reveal.
The draft proposals were drawn up by the Czech presidency of the EU in a document dated Monday and seen by The Irish Times.
The paper states that “rising energy prices and extreme volatility caused by continued supply cuts from Russia... have been steering the markets”, causing rising inflation and “severe impacts on all businesses and consumers”.
“It is critical to take stock of market developments and identify possible measures to address high electricity prices driven by high gas prices,” it reads, noting that national measures may no longer be enough.
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Among the options listed on the paper is that EU countries could act by “limiting and using the revenues of inframarginal electricity producers” — referring to companies that produce energy by cheaper sources such as coal, wind or solar, but have been able to charge for electricity at the same rate as gas due to the way the market is designed.
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This would involve “temporarily skimming the revenues earned by inframarginal generators and using these to relieve the pressure of high energy prices on customers, while leaving wholesale price unchanged”, the paper reads.
Another option listed on the paper is to intervene to decouple or limit the impact of the price of gas on the price of electricity, changing the situation in which gas sets prices for the market under the EU marginal pricing system.
This may involve “temporarily capping the price of gas used for the production of electricity”, “temporarily capping the price of imported gas from specific jurisdictions” — namely Russia — and temporarily excluding gas from its role in “price-setting on the electricity market”, it reads.
The paper warns that the large price swings in markets are causing a negative feedback loop of ever-greater volatility. The price swings are forcing companies to put down significant cash reserves to keep open positions on future prices — triggering the withdrawal of many from the market, and in turn making it even more vulnerable to price swings as its participants shrink.
To address this, the member states will consider intervening to increase liquidity in the electricity market.
In addition, the paper lays out proposals to co-ordinate the reduction of electricity demand, building on an agreement by member states to voluntarily reduce their gas use by 15 per cent that was reached in July.
The final proposal included on the paper is to examine the idea of permitting additional greenhouse gas emissions by releasing additional allowances on the EU’s Emissions Trading System, something pushed for by central European member states but strongly resisted by some northern and western countries and the European Commission.
The paper suggests the 27 may divide interventions into two phases: immediate emergency action with measures that can be quickly agreed upon by the 27; and a second phase of a more “systemic upgrade” of the design of the energy market to prevent recurrences in the future, which will require more discussion.
As principles, the measures agreed should be EU-wide, “should alleviate the impact on customer energy bills”, should fit with climate objectives, and should not inadvertently cause an increase in gas consumption or risk security of supply.
The proposals are being considered in Dublin and other national capitals, before commission officials are set to incorporate the views of member states into an adjusted proposal that will form the basis of discussions when energy ministers meet on Friday.
If the 27 agree on immediate “emergency” measures, they may seek to intervene swiftly without the need for approval by the European Parliament, by invoking Article 122 of EU law, which allows for urgent measures to be taken in case of severe difficulties.
